What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2025-08-01 compared with 2025-04-29 · 182 added, 93 removed, 229 unchanged (55% of the section changed)

4 unchanged sentences

(“Insperity,” “we,” “our,” and “us”) provides an array of human resources (“HR”) and business solutions designed to help improve business performance.

Our most comprehensive HR services offerings are provided through our professional employer organization (“PEO”) services, known as our Workforce Optimization ® and Workforce Synchronization TM solutions (together, our “PEO HR Outsourcing Solutions”), which we provide by entering into a co-employment relationship with our clients.

Our PEO HR Outsourcing Solutions encompass a broad range of HR functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management, and training and development services, along with our cloud-based human capital management solution, the Insperity Premier TM platform.

Our most comprehensive HR services offerings are provided through our professional employer organization (“PEO”) services, known as our Insperity ® HR 360 solution (formerly our Workforce Optimization ® solution) and Insperity ® HR 360 Select Edition (formerly our Workforce Synchronization TM solution) (together, our “PEO HR Solutions”), which we provide by entering into a co-employment relationship with our clients.

Our PEO HR Solutions encompass a broad range of HR functions, including payroll and employment administration, employee benefits, workers’ compensation, government compliance, performance management, and training and development services, along with our cloud-based human capital management solution, the Insperity Premier TM platform.

2025 Highlights

First Quarter 2025 Compared to First Quarter 2024

Second Quarter 2025 Compared to Second Quarter 2024

• Average number of WSEEs paid per month increased 1%

• Net income and diluted earnings per share (“EPS”) both decreased 35% to $51 million and $1.35, respectively

• Net income (loss) and diluted earnings per share (“EPS”) decreased 128% and 129% to $(5) million and $(0.14), respectively

• Adjusted net income and adjusted EPS both decreased 70% to $10 million and $0.26, respectively

• Adjusted EBITDA decreased 52% to $32 million

First Six Months 2025 Compared to First Six Months 2024

• Average number of WSEEs paid per month increased 1%

• Net income and diluted EPS decreased 53% and 52% to $46 million and $1.22, respectively

• Adjusted net income and adjusted EPS both decreased 42% to $69 million and $1.83, respectively

• Adjusted EBITDA decreased 36% to $134 million

Please read “ Non-GAAP Financial Measures ” for a reconciliation of adjusted EBITDA, adjusted net income, and adjusted EPS to their most directly comparable financial measures calculated and presented in accordance with accounting principles generally accepted in the United States (“GAAP”).

Insperity | 2025 First Quarter Form 10-Q

Insperity | 2025 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

2 unchanged sentences

Key Financial and Statistical Data

(in millions, except per share, WSEE and statistical data)

Three Months Ended March 31,

2025 2024 % Change

(in millions, except per share, WSEE and statistical data) Three Months Ended June 30, Six Months Ended June 30,

2025 2024 % Change 2025 2024 % Change

Financial data:

2 unchanged sentences

Operating expenses 230 237 (3) % 472 474 —

Operating income 68 108 (37) %

Operating income (loss)

(7) 23 (130) % 61 131 (53) %

Other income (expense), net 1 2 (50) % 5 5 —

Net income 51 79 (35) %

Net income (loss)

(5) 18 (128) % 46 97 (53) %

(0.14) 0.48 (129) % 1.22 2.56 (52) %

Non-GAAP financial measures (1) :

7 unchanged sentences

Operating expenses

Operating income

248 257 (4) % 256 259 (1) %

Net income 56 87 (36) %

Operating income (loss)

(8) 25 (132) % 33 71 (54) %

Net income (loss)

(5) 20 (125) % 25 53 (53) %

____________________________________

(1) Please read “ Non-GAAP Financial Measures ” for a reconciliation of the non-GAAP financial measures to their most directly comparable financial measures calculated and presented in accordance with GAAP.

(2) Revenues per WSEE per month are comprised of gross billings per WSEE per month less WSEE payroll costs per WSEE per month as follows:

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

(per WSEE per month) 2025 2024 2025 2024

2 unchanged sentences

Revenues $ 1,788 $ 1,743 $ 1,908 $ 1,859

Insperity | 2025 First Quarter Form 10-Q

Insperity | 2025 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

7 unchanged sentences

• During Q2 2025, average WSEEs paid increased 1% compared to Q2 2024.

The number of WSEEs paid from new client sales and client retention increased compared with Q1 2024, while the net change in our client base decreased compared with Q1 2024.

The number of WSEEs paid from new client sales and the net change in our client base increased compared with Q2 2024, while client retention remained consistent with Q2 2024.

• During the first six months of 2025 (“YTD 2025”), average WSEEs paid increased 1% compared to the first six months of 2024 (“YTD 2024”).

The number of WSEEs paid from new client sales, client retention, and the net change in our client base increased when compared to YTD 2024.

Average WSEEs Paid and

Year-over-Year Growth Percentage

Insperity | 2025 First Quarter Form 10-Q

Insperity | 2025 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Net Income and

Net Income (Loss) and

Year-over-Year Growth Percentage

3 unchanged sentences

(in millions)

Insperity | 2025 First Quarter Form 10-Q

Insperity | 2025 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

5 unchanged sentences

(amounts per share)

Our PEO HR Outsourcing Solutions revenues are primarily derived from our gross billings, which are based on (1) the payroll cost of our WSEEs and (2) a monthly markup component.

Our revenues are primarily dependent on the number of clients enrolled, the resulting number of WSEEs paid each period and the number of WSEEs enrolled in our benefit plans.

Because our monthly markup is computed in part as a percentage of payroll cost, certain revenues are also affected by the payroll cost of WSEEs, which may fluctuate based on the composition of the WSEE base, inflationary effects on wage levels and differences in the local economies of our markets.

Insperity | 2025 First Quarter Form 10-Q

Insperity | 2025 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our PEO HR Solutions revenues are primarily derived from our gross billings, which are based on (1) the payroll cost of our WSEEs and (2) a monthly markup component.

Our revenues are primarily dependent on the number of clients enrolled, the resulting number of WSEEs paid each period and the number of WSEEs enrolled in our benefit plans.

Year-over-Year Growth Percentage

(in millions)

First Quarter 2025 Compared to First Quarter 2024

Second Quarter 2025 Compared to Second Quarter 2024

Our revenues for Q2 2025 were $1.7 billion, an increase of 3%, primarily due to the following:

1 unchanged sentence

• Revenues per WSEE per month increased 3%, or $45.

We provide our PEO HR Outsourcing Solutions to small and medium-sized businesses throughout the United States.

Our PEO HR Outsourcing Solutions revenue distribution by region follows:

PEO HR Outsourcing Solutions Revenue by Region

First Six Months 2025 Compared to First Six Months 2024

Our revenues for YTD 2025 were $3.5 billion, an increase of 3%, primarily due to the following:

• Average WSEEs paid increased 1%.

• Revenues per WSEE per month increased 3%, or $49.

We provide our PEO HR Solutions to small and medium-sized businesses throughout the United States.

Our PEO HR Solutions revenue distribution by region follows:

PEO HR Solutions Revenue by Region

Insperity | 2025 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

(in millions)

1 unchanged sentence

(1) The Southwest region includes Texas.

Insperity | 2025 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The percentage of total PEO HR Outsourcing Solutions revenue in our significant markets includes the following:

The percentage of total PEO HR Solutions revenue in our significant markets includes the following:

Significant Markets

1 unchanged sentence

Currently, we have a dedicated sales management, service personnel, and consulting staff who concentrate solely on the middle market sector.

Our average number of WSEEs per month in our middle market sector increased 4% during Q1 2025 compared to Q1 2024, representing approximately 26% and 25% of our total average paid WSEEs in Q1 2025 and Q1 2024, respectively.

In determining the pricing of the markup component of our gross billings, we take into consideration our estimates of the costs directly associated with our WSEEs, including payroll taxes, benefits and workers’ compensation costs, plus an acceptable gross profit margin.

Our gross profit per WSEE and operating results are significantly impacted by our ability to accurately estimate direct costs and our ability to incorporate changes in these costs into the gross billings charged to PEO HR Outsourcing Solutions clients, which are subject to pricing arrangements that are typically renewed annually.

We use gross profit per WSEE per month as our principal measurement of relative performance at the gross profit level.

Insperity | 2025 First Quarter Form 10-Q

Our average number of WSEEs per month in our middle market sector increased 3% during YTD 2025 compared to YTD 2024, representing approximately 26% and 25% of our total average paid WSEEs in YTD 2025 and YTD 2024, respectively.

Insperity | 2025 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our gross profit per WSEE and operating results are significantly impacted by our ability to accurately estimate direct costs and our ability to incorporate changes in these costs into the gross billings charged to PEO HR Solutions clients, which are subject to pricing arrangements that are typically renewed annually.

We use gross profit per WSEE per month as our principal measurement of relative performance at the gross profit level.

Gross Profit and

1 unchanged sentence

(in millions)

Insperity | 2025 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Gross Profit per WSEE per Month and

Year-over-Year Growth Percentage

First Quarter 2025 Compared to First Quarter 2024

Second Quarter 2025 Compared to Second Quarter 2024

Gross profit for Q2 2025 decreased 14% to $223 million compared to $260 million in Q2 2024.

4 unchanged sentences

The $87 per WSEE per month increase in direct costs is due primarily to the direct cost component changes as follows:

Insperity | 2025 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Benefits costs

• The cost of group health insurance and related employee benefits increased $56 per WSEE per month and increased 8.4% on a cost per covered employee basis driven by an acceleration in inpatient, outpatient, and pharmacy costs and in the frequency of large claim activity in Q1 2025 as compared to Q1 2024.

• The percentage of WSEEs covered under our health insurance plans was 64% in both Q1 2025 and Q1 2024.

• Reported results include changes in estimated claims run-off related to prior periods, which was an increase in costs of $12 million, or $13 per WSEE per month, in Q1 2025 compared to a decrease in costs of $18 million, or $20 per WSEE per month, in Q1 2024.

• The cost of group health insurance and related employee benefits increased $65 per WSEE per month and increased 9.6% on a cost per covered employee basis driven by continued elevated pharmacy trends and frequency of large claim activity in Q2 2025 as compared to Q2 2024.

• The percentage of WSEEs covered under our health insurance plans was 63% in Q2 2025 compared to 64% in Q2 2024.

• Reported results include changes in estimated claims run-off related to prior periods, which did not impact costs in Q2 2025 compared to a decrease in costs of $25 million, or $27 per WSEE per month, in Q2 2024.

Please read Note 2 to the Consolidated Financial Statements, “ Accounting Policies – Health Insurance Costs ,” for a discussion of our accounting for health insurance costs.

1 unchanged sentence

• Workers’ compensation costs increased 4%, or $1 per WSEE per month, in Q2 2025 compared to Q2 2024.

• As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.24% in Q1 2025 compared to 0.22% in Q1 2024.

• Our continued discipline around our client selection, workplace safely and claims management has allowed for claims to be closed out at amounts below our original cost estimates, resulting in a reduction in workers’ compensation costs of $7 million, or 0.08% of non-bonus payroll costs in Q1 2025, compared to a reduction of $9 million, or 0.11% of non-bonus payroll costs in Q1 2024.

• As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.23% in both Q2 2025 and Q2 2024.

Insperity | 2025 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

compensation costs of $8 million, or 0.09% of non-bonus payroll costs in Q2 2025, compared to a reduction of $7 million, or 0.09% of non-bonus payroll costs in Q2 2024.

Please read Note 2 to the Consolidated Financial Statements, “ Accounting Policies – Workers’ Compensation Costs ,” for a discussion of our accounting for workers’ compensation costs.

2 unchanged sentences

• Payroll taxes as a percentage of payroll costs were 7% in both Q2 2025 and Q2 2024.

First Six Months 2025 Compared to First Six Months 2024

Gross profit for YTD 2025 decreased 12% to $533 million compared to $605 million in YTD 2024.

Gross profit per WSEE per month for YTD 2025 decreased $41 to $289 compared to $330 in YTD 2024 due primarily to higher direct costs, offset in part by higher average pricing, as discussed below.

Our pricing objectives attempt to achieve a level of revenue per WSEE that matches or exceeds changes in primary direct costs and operating expenses.

Our revenues per WSEE per month increased $49 due to higher average pricing of 3%.

The net increase in direct costs between YTD 2025 and YTD 2024 attributable to the changes in cost estimates for benefits and workers’ compensation totaled $40 million as discussed below.

The $90 per WSEE per month increase in direct costs is due primarily to the direct cost component changes as follows:

Benefits costs

• The cost of group health insurance and related employee benefits increased $60 per WSEE per month, or 9.0% on a cost per covered employee basis driven by continued elevated inpatient, outpatient, and pharmacy trends and frequency of large claim activity in YTD 2025 as compared to YTD 2024.

• The percentage of WSEEs covered under our health insurance plans was 63% in YTD 2025 compared to 64% in YTD 2024.

• Reported results include changes in estimated claims run-off related to prior periods, which was an increase in costs of $11 million, or $6 per WSEE per month, in YTD 2025 compared to a decrease in costs of $26 million, or $14 per WSEE per month, in YTD 2024.

Please read Note 2 to the Consolidated Financial Statements, “ Accounting Policies – Health Insurance Costs ,” for a discussion of our accounting for health insurance costs.

Workers’ compensation costs

• Workers’ compensation costs increased 8%, or $1 per WSEE per month, in YTD 2025 compared to YTD 2024.

• As a percentage of non-bonus payroll cost, workers’ compensation costs were 0.24% in YTD 2025 and 0.23% in YTD 2024.

• Our continued discipline around our client selection, workplace safely and claims management has allowed for claims to be closed out at amounts below our original cost estimates, resulting in a reduction in workers’ compensation costs of $14 million, or 0.09% of non-bonus payroll costs, in YTD 2025 compared to a reduction of $17 million, or 0.11% of non-bonus payroll costs, in YTD 2024.

Please read Note 2 to the Consolidated Financial Statements, “ Accounting Policies – Workers' Compensation Costs ,” for a discussion of our accounting for workers’ compensation costs.

Payroll tax costs

• Payroll taxes increased 4% on a 4% increase in payroll costs, or $27 per WSEE per month.

• Payroll taxes as a percentage of payroll costs were 7% in both YTD 2025 and YTD 2024.

Insperity | 2025 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Operating Expenses

9 unchanged sentences

◦ employee travel and training expenses

Insperity | 2025 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

◦ facility costs, including repairs and maintenance

◦ technology costs, including software-as-a-service (“SaaS”) subscription costs, amortization of SaaS implementation costs and costs related to our strategic partnership with Workday, Inc.

◦ technology costs, including software-as-a-service (“SaaS”) subscription costs, amortization of SaaS implementation costs and third-party costs related to our strategic partnership with Workday, Inc.

• Depreciation and amortization — Depreciation and amortization expense is primarily a function of our capital investments in corporate facilities, service centers, sales offices, software development, and technology infrastructure.

First Quarter 2025 Compared to First Quarter 2024

Insperity | 2025 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Second Quarter 2025 Compared to Second Quarter 2024

The following table presents certain information related to our operating expenses:

Three Months Ended March 31,

Three Months Ended June 30,

(in millions, except per WSEE)

15 unchanged sentences

Total operating expenses $ 230 $ 237 (3) % $ 248 $ 257 (4) %

Operating expenses for Q1 2025 increased 2% to $242 million compared to $237 million in Q1 2024.

Operating expenses per WSEE per month for Q1 2025 increased 2% to $264 compared to $260 in Q1 2024.

Operating expenses for Q2 2025 decreased 3% to $230 million compared to $237 million in Q2 2024.

Operating expenses per WSEE per month for Q2 2025 decreased 4% to $248 compared to $257 in Q2 2024.

• General and administrative expenses for Q2 2025 decreased 14% to $49 million, or $9 per WSEE per month, compared to Q2 2024.

The decrease was primarily due to decreased professional services fees, travel and training expenses, and amortization of SaaS implementation costs, partially offset by increases in software licensing and maintenance costs.

First Six Months 2025 Compared to First Six Months 2024

The following table presents certain information related to our operating expenses:

Six Months Ended June 30,

(in millions, except per WSEE) 2025 2024 % Change 2025 2024 % Change

Salaries $ 271 $ 266 2 % $ 147 $ 145 1 %

Stock-based compensation 31 30 3 % 17 16 6 %

Commissions 21 23 (9) % 11 13 (15) %

Advertising 18 19 (5) % 10 10 —

General and administrative:

Amortization of SaaS implementation costs 3 6 (50) % 2 3 (33) %

Workday SaaS licensing and implementation expense 13 12 8 7 7 —

All other general and administrative 93 96 (3) % 50 53 (6) %

Total general and administrative 109 114 (4) % 59 63 (6) %

Depreciation and amortization 22 22 — 12 12 —

Total operating expenses $ 472 $ 474 — $ 256 $ 259 (1) %

Operating expenses for YTD 2025 decreased to $472 million compared to $474 million in YTD 2024.

Operating expenses per WSEE per month for YTD 2025 decreased 1% to $256 compared to $259 in YTD 2024.

Insperity | 2025 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Other Income (Expense)

Interest income decreased $2 million in YTD 2025 compared to YTD 2024 due to interest rate decreases on overnight, investment and deposit holdings.

Interest expense decreased $2 million in YTD 2025 compared to YTD 2024 due to decreases in interest rates charged on borrowings under our credit facility.

Income Tax Expense

Three Months Ended March 31,

Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Effective income tax rate 17% 28% 30% 29%

For the three months ended March 31, 2025, our provision for income taxes differed from the U.S.

For the six months ended June 30, 2025, our provision for income taxes differed from the U.S.

statutory rate primarily due to state income taxes, non-deductible expenses and vesting of restricted and long-term incentive stock awards.

During the first three months of 2025, we recognized additional income tax of $1 million related to the vesting of long-term incentive and restricted stock awards, primarily due to the vesting date price being below the grant date price.

Insperity | 2025 First Quarter Form 10-Q

During the first six months of 2025 we recognized a $1 million income tax expense related to the vesting of long-term incentive and restricted stock awards.

During the first six months of 2024 we did not recognize an income tax benefit or expense related to the vesting of long-term incentive and restricted stock awards.

On July 4, 2025, H.R.1, which is known as the “One Big Beautiful Bill Act,” was signed into federal law.

This law includes significant changes to federal tax law and other regulatory provisions that may impact us.

ASC 740, “Income Taxes”, requires the effect of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted.

We are currently evaluating the provisions of H.R.1 and the potential effects on our financial position, results of operations, and cash flows.

As of the date of these financial statements, we have not completed our assessment, and therefore no adjustments have been made.

Additional disclosures of any material impact will be provided in future periods as the effect of the legislation is determined.

Insperity | 2025 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

28 unchanged sentences

• non-cash stock-based compensation.

Insperity | 2025 First Quarter Form 10-Q

Insperity | 2025 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

1 unchanged sentence

Following is a reconciliation of payroll cost (GAAP) to non-bonus payroll costs (non-GAAP):

(in millions, except per WSEE per month)

Three Months Ended March 31,

Per WSEE Per WSEE

(in millions, except per WSEE per month) Three Months Ended June 30, Six Months Ended June 30,

2025 2024 2025 2024

Per WSEE Per WSEE Per WSEE Per WSEE

Payroll cost $ 8,900 $ 9,597 $ 8,756 $ 9,508 $ 19,181 $ 10,394 $ 18,437 $ 10,061

Bonus payroll cost 705 760 845 917 2,948 1,598 2,707 1,478

2,243 2,444 1,862 2,042

Non-bonus payroll cost

1 unchanged sentence

Payroll cost % change period over period

2 % 1 % 1 % 3 % 4 % 3 % 1 % 2 %

Non-bonus payroll cost % change period over period

4 % 3 % 1 % 2 % 3 % 2 % 1 % 2 %

Following is a reconciliation of cash, cash equivalents and marketable securities (GAAP) to adjusted cash, cash equivalents and marketable securities (non-GAAP):

(in millions)

March 31, 2025 December 31, 2024

June 30, 2025 December 31, 2024

Cash, cash equivalents and marketable securities $ 456 $ 1,055

2 unchanged sentences

Adjusted cash, cash equivalents and marketable securities $ 114 $ 134

Following is a reconciliation of net income (GAAP) to EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP):

Three Months Ended March 31,

Insperity | 2025 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Following is a reconciliation of net income (loss) (GAAP) to EBITDA (non-GAAP) and adjusted EBITDA (non-GAAP):

Three Months Ended June 30, Six Months Ended June 30,

(in millions, except per WSEE per month) 2025 2024 2025 2024

Per WSEE Per WSEE

Net income $ 51 $ 56 $ 79 $ 87

Income tax expense 21 22 32 35

Per WSEE Per WSEE Per WSEE Per WSEE

Net income (loss)

$ (5) $ (5) $ 18 $ 20 $ 46 $ 25 $ 97 $ 53

Income tax (benefit) expense

(1) (1) 7 7 20 10 39 22

Interest expense 6 6 7 8 12 7 14 8

1 unchanged sentence

Depreciation and amortization

11 12 11 12 22 12 22 12

EBITDA 12 13 46 50 103 56 178 98

Stock-based compensation

20 22 20 22 31 17 30 16

Adjusted EBITDA $ 32 $ 35 $ 66 $ 72 $ 134 $ 73 $ 208 $ 114

Net income % change period over period (35) % (36) % (17) % (16) %

Net income (loss) % change period over period

(128) % (125) % 50 % 43 % (53) % (53) % (9) % (9) %

Adjusted EBITDA % change period over period

Insperity | 2025 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Following is a reconciliation of net income (GAAP) to adjusted net income (non-GAAP):

Three Months Ended March 31,

(52) % (51) % 29 % 33 % (36) % (36) % 2 % 4 %

Following is a reconciliation of net income (loss) (GAAP) to adjusted net income (non-GAAP):

Three Months Ended

June 30, Six Months Ended

(in millions) 2025 2024 2025 2024

Net income $ 51 $ 79

Net income (loss)

$ (5) $ 18 $ 46 $ 97

Non-GAAP adjustments:

3 unchanged sentences

Adjusted net income $ 10 $ 33 $ 69 $ 119

Net income % change period over period (35) % (17) %

Net income (loss) % change period over period

(128) % 50 % (53) % (9) %

Adjusted net income % change period over period

(70) % 32 % (42) % (7) %

Insperity | 2025 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Following is a reconciliation of diluted EPS (GAAP) to adjusted EPS (non-GAAP):

Three Months Ended March 31,

Three Months Ended

June 30, Six Months Ended

(amounts per share) 2025 2024 2025 2024

14 unchanged sentences

We have in the past sought, and may in the future seek, to raise additional capital or take other steps to increase or manage our liquidity and capital resources.

We had $568 million in cash, cash equivalents and marketable securities at March 31, 2025, of which approximately $404 million was payable in April 2025 for withheld federal and state income taxes, employment taxes and other payroll deductions.

Approximately $40 million represented client prepayments that were invoiced in April 2025.

At March 31, 2025, we had working capital of $188 million compared to $155 million at December 31, 2024.

We had $456 million in cash, cash equivalents and marketable securities at June 30, 2025, of which approximately $316 million was payable in July 2025 for withheld federal and state income taxes, employment taxes and other payroll deductions.

Approximately $26 million represented client prepayments that were invoiced in July 2025.

At June 30, 2025, we had working capital of $160 million compared to $155 million at December 31, 2024.

We currently believe that our cash on hand, marketable securities, cash flows from operations, and availability under the Facility will be adequate to meet our liquidity requirements for the remainder of 2025.

We intend to rely on these same sources, as well as public and private debt or equity financing, to meet our longer-term liquidity and capital needs.

As of March 31, 2025, we had outstanding letters of credit and borrowings totaling $370 million under the Facility.

As of June 30, 2025, we had outstanding letters of credit and borrowings totaling $370 million under the Facility.

Please read Note 5 to the Consolidated Financial Statements, “ Long-Term Debt ,” for additional information.

Insperity | 2025 First Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Cash Flows from Operating Activities

Net cash used in operating activities in the first three months of 2025 was $443 million.

Net cash used in operating activities in the first six months of 2025 was $522 million.

Our primary source of cash from operations is the comprehensive service fee and payroll funding we collect from our clients.

5 unchanged sentences

therefore, operating cash flows decrease in the reporting periods that end on a Friday or a Monday.

In the three months ended March 31, 2025, the last business day of the reporting period was a Monday, client prepayments were $40 million and employment taxes and other deductions were $404 million.

In the three months ended March 31, 2024, the last business day of the reporting period was a Friday, client prepayments were $34 million and employment taxes and other deductions were $443 million.

In the six months ended June 30, 2025, the last business day of the reporting period was a Monday, client prepayments were $26 million and employment taxes and other deductions were $316 million.

In the six months ended June 30, 2024, the last business day of the reporting period was a Friday, client prepayments were $22 million and employment taxes and other deductions were $459 million.

In addition, $440 million of client employee retention tax credits received on their behalf from the Internal Revenue Service during the fourth quarter of 2024 were distributed to clients in early 2025.

Insperity | 2025 Second Quarter Form 10-Q

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

• Medical plan funding — Our health care contract with United establishes participant cash funding rates 90 days in advance of the beginning of a reporting quarter.

1 unchanged sentence

In addition, changes to the funding rates, which are solely determined by United based primarily upon recent claim history and anticipated cost trends, also have a significant impact on our operating cash flows.

As of March 31, 2025, Plan Costs were less than the net premiums paid and owed to United by $52 million, which is $43 million in excess of our agreed-upon $9 million surplus maintenance level.

The $43 million difference is therefore reflected as a current asset and $9 million is reflected as a long-term asset on our Condensed Consolidated Balance Sheet at March 31, 2025.

In addition, the premiums owed to United at March 31, 2025, were $64 million, which is included in accrued health insurance costs, a current liability, on our Condensed Consolidated Balance Sheet.

As of June 30, 2025, Plan Costs were less than the net premiums paid and owed to United by $35 million, which is $26 million in excess of our agreed-upon $9 million surplus maintenance level.

The $26 million difference is therefore reflected as a current asset and $9 million is reflected as a long-term asset on our Condensed Consolidated Balance Sheets at June 30, 2025.

In addition, the premiums owed to United at June 30, 2025, were $53 million, which is included in accrued health insurance costs, a current liability, on our Condensed Consolidated Balance Sheets.

• Operating results — Our adjusted net income has a significant impact on our operating cash flows.

Our adjusted net income decreased 31% to $59 million in the first three months of 2025, compared to $86 million in the first three months of 2024.

Our adjusted net income decreased 42% to $69 million in the first six months of 2025, compared to $119 million in the first six months of 2024.

Please read “ Results of Operations .”

Cash Flows from Investing Activities

Net cash flows used in investing activities were $6 million for the three months ended March 31, 2025, primarily due to property and equipment purchases.

Net cash flows used in investing activities were $11 million for the six months ended June 30, 2025, primarily due to property and equipment purchases.

Cash Flows from Financing Activities

Net cash flows used in financing activities were $49 million for the three months ended March 31, 2025.

Net cash flows used in financing activities were $78 million for the six months ended June 30, 2025.

We paid $45 million in dividends and repurchased or withheld $19 million in stock.

In addition, client funds liability and other financing activities decreased by $14 million.

Insperity | 2025 First Quarter Form 10-Q

Insperity | 2025 Second Quarter Form 10-Q

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK AND CONTROLS AND PROCEDURES

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis